Am I Entitled to Encash My CL and SL During Full and Final Settlement?

I had worked in a private organization and resigned due to personal reasons. I have a leave balance of:

- EL – 31.5
- CL – 12
- SL – 23

During the full and final settlement, the company settled only the EL. The CL and SL were not encashed, which is a significant monetary loss for me. Kindly suggest or advise whether I am eligible to receive CL and SL during my F&F.

Thanks & Regards
R.Balaji

Leave Encashment Policies

Normally, Earned Leaves (ELs) are encashed at the time of making the full and final settlement of the employee. Casual Leave (CL) and Sick Leave (SL) encashment depends on the policy of the company.

In the Shops and Establishment Act, ELs are to be encashed. First, you need to check under which act your company is registered—whether in the Factory Act or in the Shops and Establishment Act. For example, if your company is registered under the Shops and Establishment Act of Chennai state, check the act either by using Google or from this site (search option available above). Once you find it, go through the leave clause of the act. You will then get the answer.

Hope your query is answered.

The Factories Act provides for the encashment of earned leave to the credit of the employee. There is no such statutory provision for allowing the encashment of sick leave and casual leave (CL). Indeed, CL lapses every year, so there is no question of its encashment since encashment is allowed for unavailed leave.

Regards,
KK

As per the Leave Policy, only the balance of Earned Leave (EL) is encashed. So, if your company maintains a leave policy where Casual Leave (CL) and Medical Leave (ML) are encashed, then your full and final settlement provided by your company is correct. Generally, CL and ML are not transferable from year to year.

Thanks,

Parimal Kishore.

I'm sorry to say that sick leave is meant only for when you are genuinely ill, and there is no policy or rule allowing the encashment of casual leave.

Regards,
Kumar S.

Please tell me which section of the Factory Act provides for encashment of unutilized leave? Is there really a provision that makes it compulsory for the encashment of leave?

Sorry, CL and SL are not encashable. You have to forgo the balance of unavailed leaves at the time of separation.

Regards,
B.K. Mohanty
Advisor and Senior Consultant

Please check the following link: India. The Factories Act

Section 79. Annual Leave with Wages

(3) If a worker is discharged or dismissed from service, quits his employment, is superannuated, or dies while in service during the course of the calendar year, he or his heir or nominee, as the case may be, shall be entitled to wages in lieu of the quantum of leave to which he was entitled immediately before his discharge, dismissal, quitting of employment, superannuation, or death. This is calculated at the rates specified in sub-section (1), even if he had not worked for the entire period specified in sub-section (1) or sub-section (2) making him eligible to avail of such leave, and such payment shall be made:

• (i) Where the worker is discharged or dismissed or quits employment, before the expiry of the second working day from the date of such discharge, dismissal, or quitting; and

• (ii) Where the worker is superannuated or dies while in service, before the expiry of two months from the date of such superannuation or death.

Question on Leave Encashment

Is there any rule saying encashment of unused leave is compulsory when the person is not leaving the company? We generally follow a practice of not carrying forward any leave and not providing encashment either. We want the employees to avail of all leave and take the required rest and break from work. Is there any rule against this under the Factories Act or the Shop and Establishment Act?

Section 79(3) and 79(10) make it mandatory for the encashment of remaining leave in the event the services of a workman come to an end. There is no statutory provision for leave encashment while the employee is still in service.

Regards,
KK

No law or act compels anybody to encash leave while in service. However, based on individual firm's policies, if there is a clause, then anyone with a credit to their leave account can encash it. Some MNCs and Indian companies have leave policies that mandate availing leave and encashing part of the leave as compulsory, as they may question the need to allow leave carryover. Allowing employees to exhaust their leave without pressure felt in the office. Some banks have compulsory encashment when an employee avails LTA on leave. Generally speaking, leave encashment is policy-centric.

Regards,
Kumar.s.